Targeted drug maker NitroMed Inc. plans to sell its BiDil drug business to JHP Pharmaceuticals LLC for a possible $26.3 million. New Jersey-based JHP, a privately held specialty pharmaceutical company, will buy the assets related to BiDil for $24.5 million in cash, plus up to an additional $1.8 million for inventory at the closing date.

[...]

NitroMed also reported its financial results for the third quarter which ended Sept. 30. The company's total revenues climbed slightly to $4 million, compared to $3.8 million for the same period in 2007. All of that revenue came from sales of BiDil, officials said. NitroMed's net loss dropped to $400,000 for the quarter, compared to a net loss of $8.4 million last year.

Yeah, sounds like it's time to off-load that to a company that has other winners in its lineup and doesn't need to maintain the marketing and manufacturing overhead required to keep BiDil on the market. Of course, they should have done that in the first place. You can't really build an entire company around an uninteresting drug priced too high to be relevant when its components are already available in generic form for pennies per tablet. It's not a bad drug; it's just too expensive for what it is.

If JHP is smart, they'll cut the price to about a third of its current cost, and let volume take care of the rest. Not that BiDil will ever be a huge winner, but it could certainly be bigger than it currently is if priced and marketed appropriately. Monopoly pricing only works when you have something people want, and are willing to pay for.

In any event, it looks like it's for real. As far as I know, this is the only time in recent history where a generic has been withdrawn. I think I recall similar things happening for Lanoxin (digoxin) and Synthroid (levothyroxine), but generics for those drugs were withdrawn because of problems with bioequivalence rather than as a result of litigation.

It's going to suck explaining the reasons why clopidogrel is temporarily going the way of the Dodo. People don't take too kindly to the idea of their copayments doubling (or more). I'm thinking I should write a little handout for people explaining what happened so we don't have to have the same conversation 500 times. After telling something a dozen or so times, you've heard all the wisecracks and complaints that such a topic engenders, and it just gets redundant and tiresome.

I also think the idea of jerking patients/consumers around like this is ethically wrong, patents and the justice system be damned. But then morality is entirely dependent on one's point of view, now isn't it?

[tags]Medicine, pharmacy, big pharma, plavix, clopidogrel, ethics[/tags]

One of the exciting results announced at ASCO has been the affect of Tykerb on patients who have failed Herceptin therapy. The trial compared breast cancer patients on chemotherapy to those on chemotherapy + Tykerb. The results were that the 320 women who took Tykerb alongside their chemo went 4 months longer than those on just chemo without their cancer progressing. As a bonus, Tykerb is administered orally rather than intravenously.

GSK is expected to submit the findings to the FDA this year, and Tykerb could hit the market as early as 2007. Hopefully Tykerb will not get tripped up like Avastin did under further review. If it remains a success, Tykerb could be a very big seller, and benefit thousands of women in the US alone. In the future, Tykerb could compete against Herceptin more directly.

[tags]Medicine, pharmacy, ASCO, Tykerb, GSK, cancer, oncology[/tags]

Probably both. Yep. It's both.

In the May 8 issue of Forbes magazine, the feature article is about Big Pharma and their marketing efforts. Stories like this are nothing new, nor do they really have anything contructive to say on the topic except to shine a bright light on a problem that has popular appeal. Big Pharma does spend a lot of money on marketing, but is it too much? I don't think so, and consequently I can't resist going through the article and picking out bits and pieces that're off the mark, and the ones that are right on. Yes, this is my idea of fun while being stuck in the lounge of a car dealership, waiting to get my car back…

This article is about 2000 words short, so you may wish to get a coffee before you start reading. Or, you know, go to the bathroom or something.

• The balogna
• Contradictions and lifestyle drugs
• Science or marketing?
• "Me-too" drugs
• Marketing and the game of deception
• Short term profits, long term value and calculated risk
• HMOs to the rescue?
• The problem of medical journals

The balogna

Novartis employs some of the best medical researchers in the world, and they have created such lifesavers as Gleevec, which treats a deadly form of leukemia. But what is the fourth-biggest seller in the Novartis medicine cabinet? No lifesaver. It's Lamisil, a pill for–horrors!–toenail fungus. The main effect of the fungus is that it turns the toenail yellow; it can hurt, but no one has died of this inconvenience.

I don't really see the relevance. Toenail fungus is a heck of a lot more common than the cancers that Gleevec treats. While Novartis could probably jack up the prices for Gleevec to inflate sales figures, there's really no point. In any event, while Lamisil may only be effective in 38% of patients, there's no reason that people with toenail fungus should suffer if they are willing to pay what Novartis charges. That's the great thing about living in a wealthy first-world country: we don't have to put up with things like toenail fungus if we don't want to.

In 2005, Lamisil accounted for $1.2 billion in sales. They spent $100 million on advertising which amounts to 8% of the revenue from Lamisil. That's just good business — and make no mistake, medicine is a business.

Contradictions and lifestyle drugs

Lifestyle drugs, like Viagra and Lamisil sell, and they sell well. They don't save lives, but there's nothing wrong with a drug that doesn't save lives, implying that there is is totally ridiculous. Comparing Lamisil to Gleevec is absurd as well: drugs like Gleevec are already enormously expensive, and they catch lots of flak because they ARE expensive, by the same mainstream media that basically whines that they aren't bigger sellers.

So which is it?

So the MSM is wishy-washy, now what about Big Pharma? Well they're hardly innocent — they're worse than the media, in many cases. At least from a moral standpoint — that nebulous ideal that we'd all like to think is the real driving force behind medical innovation. From a business standpoint, Big Pharma are some of the most conscientious, respected, philanthropic publicly-traded companies out there.

Science or marketing?

"Absolutely, marketing doesn't trump science–this is a science-driven industry," says Scott Lassman, a lawyer for Phrma, the industry trade group.

In theory medicine is a science-driven industry, and while R&D spending regularly trumps marketing spending, this isn't an especial shock — marketing is inherently less expensive than employing hundreds of scientists and paying for clinical trials and researching new therapies. And while Lassman is probably telling the truth, there has certainly been a greater emphasis on marketing since the direct-to-consumer (DTC) advertising restrictions were lifted about a decade ago. And I have lamented just yesterday that drug pipelines are indeed running drier than they have in the past.

This emphasis on marketing isn't ocurring in market bubble, either. The entire market has begun shifting its focus to quarterly earnings rather than long-term health. The recent Microsoft stock downgrade by several analysts because it was going to spend more money on R&D and shoring up its product lines is a perfect example of this. Despite this money being spent to strengthen the company it would hurt quarterly earnings, so it was downgraded by analysts. Absurd. But this is the market that Big Pharma plays in too, and they feel the same pressures that other publicly-traded companies feel. When you're a large pharmaceutical company with a huge market cap, analyst ratings have more of an effect on stock price than does releasing the next blockbuster. Analysts look at more than just drug pipelines, and some of the things they look at have nothing to do with the overall value and health of the company they're looking at. Buy and hold investment strategy is largely a thing of the past.

"Me-too" drugs

The article goes on to talk about Levitra and Cialis: me-too drugs in their own right without a doubt. It should be noted that the drug that these meds are modelled after was an accidental find — sildenafil citrate, the active ingredient in Viagra, was originally developed for pulmonary arterial hypertension (PAH), not erectile dysfunction. It just so happened that just about every male suffered from prolonged erections not related to sexual excitement during drug trials, so the emphasis was shifted to ED because the severity of such a side effect would render it unmarketable. And it certainly has been a success in this regard.

Creating Levitra and Cialis meant easy money for their respective makers, because they were capitalizing on the success of a trailblazer. Not creating me-too versions would have been a disservice to their shareholders. Why throw away easy money when it's staring you in the face? And easy money isn't necessarily bad — businesses are in business to make money, and that's what they do, and Big Pharma is certainly no exception.

Marketing and the game of deception

Some of these ad-driven trials are skewed to pit the sponsor's full-strength product against a weaker dose of a rival pill.

This is true, and seeing these games makes my blood boil. For instance, Prilosec is usually sold in its 20mg form, but when Nexium was released, the literature compared 20mg of Prilosec to 40mg of Nexium. A former AstraZeneca rep told me that this was done intentionally to make it seem more appealing. Milligram for milligram the two drugs are about equally effective, with only a percentage point or two difference — not enough to be statistically significant in the real world. (Nexium and Prilosec, for those who don't know, are essentially the same drug — Prilosec is a racemic mixture (omeprazole), and Nexium is the isolated S half of that mixture (esomeprazole).)

Short term profits, long term value and calculated risk

"Everyone was doing the same thing, so the chances of success got smaller and smaller." Big Pharma "said we were nuts" to test a cancer drug that targeted only 25% of breast cancer patients, Levinson recalls. Now the drug, Herceptin, is near $1 billion in annual sales. "If you are developing novel drugs, you don't need sales forces of tens of thousands."

This is certainly true, and it's no surprise that it's a biotech company (Genentech) demonstrating this principle. The next generation pharmaceuticals are going to be the highly-specific therapies that biotech companies can provide. Biotech still holds the promise that it did back during the bubble days; it just takes longer to get from A to B than early investors were willing to wait.

There needs to be a balance between short-term profits and long term value. This is a balance that I haven't seen Big Pharma strike, yet. Eventually they will, because their long-term survival will depend on it. No analyst is going to give good ratings to a company with a dry pipeline. Schering-Plough lost two thirds of its market cap in the last several years for this reason. Beating the horse for that last burst isn't going to matter when you try to begin the next lap and it dies under you. You need fresh products to perpetuate your survival. And the pharmaceutical industry hasn't figured out the right balance yet. Just like the technology industry, the savior of Big Pharma will likely be licensing agreements with and acquisitions of smaller biotech companies that have developed new therapies. Smaller companies can innovate and change faster than large ones can, but they lack the massive infrustracture (marketing, manufacturing, etc.) that large companies can bring to the table.

Short-term thinking on the part of Lilly, specifically cited in the article as having given up on antibiotics, will lead to it having its lunch in that area eaten by Merck. Merck will have some rough days in the next five years, but they've also got one of the strongest, most well-diversified pipelines of any of the big drug companies, and that is what will ultimately power them through the mess they've created for themselves with Vioxx. Just about every significant breakthrough that I've covered here in the last month has been by Merck, many of them truly significant.

Ad spending certainly has an effect on demand. Patients do make requests and threaten to find new doctors if their current providers don't cave to their demands. In this respect, DTC advertising is bad for consumers. Most of the time, a doctor is better-equipped to make therapeutic decisions than the patients they treat.

HMOs to the rescue?

Ironically, it could be the insurance companies that end up shouldering the burden of the costly battle. Measures have already been put into place to curb unnecessary expenditures. Prior authorizations for non-step therapies, for instance. Doctors know what the rules are, but often don't play by them because it's more convenient for them (and the patient) not to. Why experiment with a low-cost H2 blocker when you can go right for a guaranteed PPI at twice the price? When a prior authorization for an expensive drug is denied, I truly don't feel too bad for the doc or the patient — I've never seen a PBM deny a PA when there was a good reason for a patient to have it.

PBMs have goals that are almost diametrically opposed to those of Big Pharma, so their opposite pulls will hopefully eventually allow the insanity to stop. PBMs don't make money when a patient fills a prescription for an expensive brand-name drug. They make money when the patient opts to do mail order pharmacy with generic drugs. (I hope to have an article on this breakdown in the next month.) So in a way, it's almost a scenario where the enemy of the enemy is your friend. Who "you" is is still up for grabs, and how much of a friend a self-serving business can truly be remains to be seen. Past experience indicates that it only lasts so long as it benefits the corporation's bottom line. To those who lament the greed of big business — it's their job. It's what they're in business to do: make money. So save your ire for something worth it. Like medical journals.

The problem of medical journals

Medical journals are a business as well. Ostensibly, their job is to disseminate clinically-significant data about new therapies to providers so they can make a well-informed decision. The reality is that journals make most of their money by selling thousands of reprints to Big Pharma so they can give them to their sales reps to give to doctors and other providers. In many cases they are just expensive, prestigious marketing tools. (The case of NEJM and Vioxx springs readily to mind.) But they have escaped the scrutiny of the media and even many medical professionals because their role is more passive, their motivations less obvious. They are loathe to issue retractions for many reasons (loss of credibility, loss of money on reprints for the articles retracted, etc.), and in a way their contribution to the problem of medicine and marketing is more nefarious: it's no secret big drug companies are out to make a few bucks. But what about the journals that publish their findings and make these things possible? It would be nice to see the media shine its biased light in their general direction for a change.

[tags]Medicine, pharmacy, Big Pharma, marketing, journalism, advertising, consumer spending, economics[/tags]

This is just the latest trend in a newly-rekindled vaccination industry. Turns out there's money in vaccines after all.

But analysts reckon the vaccine market will grow much faster than the market for prescription drugs. "We're in a period where pharmaceutical sales are growing at 5% to 6% a year," says Novartis Chief Executive Daniel Vasella. "In contrast, the vaccine industry is looking at nearly 20% annual growth over the next five years."

I tend to take what analysts think with a grain of salt, because I get fed up with their near-obsessive emphasis on quarterly earnings, but they're probably right in this case. Biologics are heating up, and vaccinations are a big part of this. Along with expensive, niche biologic drugs, vaccines will probably be consistent money-makers for Big Pharma. The reason for this is is that it's quite difficult to get a generic biologic approved by the FDA. It can be done, but the FDA had to create a new way to approve these "generics," but this precedent of sorts may not hold water for other biologic generics:

The FDA said the approval did not set a precedent for other copycat biologics. Human growth hormone is one of the better understood protein compounds, making it possible to compare brand name and generic versions, it added.

"The approval of Omnitrope … does not establish a pathway for approval of follow-on products for biological products … nor does it mean that more complex and/or less well understood proteins approved as drugs under the Food, Drug, and Cosmetic Act could be approved as follow-on products," the FDA said in a statement on its Web site.

Unfortunately I cannot find the source of the quote, but in any event, it will be interesting to see what happens when more biologics start going off-patent. Will they still be big money-makers for Big Pharma due to bioequivalency issues? Or will have generic drugmakers have figured out ways around these potential roadblocks by that time?

It's easy to think that the generic companies will have figured something out by then, but I am reminded of the bioequivalency issues that generic manufacturers had with drugs like Lanoxin (digoxin) and Synthroid (levothyroxine) for quite a few years. It's not as easy as firing up a photocopier, particularly with complex biologic drugs.

It's a clear victory for Big Pharma, and a loss for consumers and any company that's not Sanofi-Aventis or BMS. Plavix was #2 on the top 200 list in 2005, with sales totaling $5.2 billion. Had Apotex been successful and not settled out of court, there would have been a generic Plavix available relatively quickly. Unfortunately they settled for the guaranteed money, and exclusive rights for 8 months. As I've said before, the value of the generic drug market is tiny compared to Big Pharma — by taking the settlement BMS, S-A, and Apotex all win. (Personally if I was Apotex, I'd have pushed for a higher figure, just because Plavix is so valuable.)

As soon as the results were announced, ten lawsuits by health plans, unions, and other businesses were immediately filed in retaliation, alleging the deal violates federal antitrust laws. The FTC has said that they will examine the case to see if there are any laws being broken. Frankly, I don't know enough about antitrust law to speculate whether the new round of litigation holds any water. It will certainly be an interesting case to watch, and has implications for further back-room licensing deals between major pharmaceutical companies and generic drugmakers, though nothing as unique as this has happened in recent memory that I am aware of.

Don't be surprised to see the number of similar lawsuits mushroom over the next five years as pipelines run dry and patents expire — it will be the only way Big Pharma will be able to maintain their otherworldly revenues for a precious few extra years. I have not seen a change in the way Big Pharma conducts their R&D efforts, and even if they did, there would still be a multi-year dearth of new drugs in the near-term. The path Big Pharma chose back when direct-to-consumer advertising restrictions were lightened has resulted in fat profits when their focus shifted to marketing instead of R&D. Unfortunately for them and everyone else, this more litigation and fewer breakthroughs.

[tags]Medicine, Pharmacy, Sanofi-Aventis, BMS, Plavix, clopidogrel, Big Pharma, antitrust law[/tags]

Mylan will now have a mandatory 180 day monopoly on the sale of three strengths of Imitrex: 50mg, 100mg, and 150mg tablet forms thanks to the Hatch-Waxman Act that I've talked about before, provided GSK doesn't pay them to not sell it so they can extend their effective patent life by another 6 months, which is certainly a possibility. Injectable and intranasal forms of Imitrex remain covered by patent, and I don't think we'll see Imitrex tablets going OTC in this country anytime soon.

[tags]Imitrex, GSK, Sumatriptan, medicine, pharmacy, Coreg, carvedilol[/tags]

Overall, sales only increased 5.4% in 2005, down from an 8.5% increase in 2004. This data comes from Medco (the people behind the PAID PBM, one of the largest prescriptions insurers in the country), and their numbers cover a wide cross-section of the market, so they're probably representative of the industry as a whole. Big jumpers on terms of dollars spent were sleep aids: Lunesta and Ambien leading the pack, probably due in large part to direct-to-consumer advertising.

Curiosity got the better of me, and I did a little research, and here are the drugs that have either come off patent in 2006, or will in the next few months. The numbers in front are where the drugs listed stand on the top 200 list* for US sales:

• #2: Zocor
• #6: Zoloft
• #21: Pravachol
• #35: Allegra
• #44: Flonase
• Total sales: $13 billion

I suspect that we'll see a continuing downward trend when the numbers are released for next year. These drugs are some of Big Pharma's biggest hitters in terms of overall sales, and the total revenues for COX-2 inhibitors don't even compare to what is being lost in 2006. Great news for consumers and employers. Newer medications could pick up some of the slack, but super costly niche drugs like Humira and other monoclonals will never pack the revenue punch that widely-used statins, allergy meds, and SSRIs do.

* All numbers are from 2004, which is the most recent year for which data is available.

[tags]Prescription spending, COX-2 inhibitors, consumer spending, medicine[/tags]

Before I even begin, I should state that Americans, by and large, have absolutely no idea what health care costs. This means doctors' visits, prescription costs, and anything else you can think of. Insurers have added a layer of abstraction to health care equation that insulates the public from what drugs, in this case, actually cost. (As a result, you'll find patients complaining about insurance companies far more often than you'll hear them complain about anything else.) By and large, this insulation is probably a good thing — when one is sick, worrying about what something costs should be the last thing on one's mind. Many HMOs charge a flat copayment for long hospital stays. Rarely does a patient see an itemized bill.

The downside of this is the "Holy crap!" factor that a patient experiences when a particular treatment is not covered. I see it every day, and I've grown immune to it and the string of complaints that usually ensues. (What I do find funny in a sad sort of way is that the patient often blames the wrong entity for their misfortune — for instance complaining about Blue Cross when they should be complaining about Express Scripts.) Every once in a while, the media catches hold of a particular drug or class of drugs and focuses in on how exorbitant the cost is, and how it shouldn't be that way. Sometimes they're right, and sometimes they're wrong.

This time, the media was wrong.

The WSJ recently shined its influential spotlight on the cost of several cancer drugs — it was the top story on the first page of section B — the article examines the cost of several medications, and makes erroneous comparisons to the backlash against HIV meds. Yes, Erbitux is expensive. Revlimid is expensive, and so is Avastin. But you don't see lines of terminally ill cancer patients picketing oncology clinics. (And it's not just because they're terminally ill.)

The value that these drugs provide is real. Erbitux, the most expensive drug named in the WSJ article, has been shown to extend the median survival rate for patients suffering from certain head and neck cancers from 28 to 54 months. I do not know how much Erbitux cost to develop — I can't seem to find that information — but I do know that the "average" cost to bring a New Chemical Entity (NCE) to market is about $500 million. Erbitux, being a monoclonal antibody, probably cost closer to $800-1,000 million to develop. Sales of Erbitux for 2005 totaled some $281 million worldwide. (It's also interesting to note that North America only accounts for 2% of Erbitux's sales!) Calculating the costs of manufacture, transport, and recovering R&D costs, and you'll find that Erbitux hasn't even paid for itself yet, so it's not as though ImClone is getting fat on Erbitux profits. Yet.

Drugwonks has some additional food for thought about some of the other metrics involved:

Indeed, the entire article ignores three important questions: Are the new generation of cancer drugs better than previous therapies? What would the economic and medical impact be if all these therapies were used in treating various forms of cancer? Are oncologists using these new treatments in an optimal fashion?

Their basic conclusion is that these drugs are significantly better than previous therapies — a longer lifespan is certainly easy to measure. In purely financial terms, the cost of Erbitux runs about $120,000 for a year, whereas a human life is estimated to be worth about $300,000 a year. (Disclaimer: I have no idea how that figure was arrived at.) The point stands that $120,000 for a year's worth of treatment is expensive by anyone's measure, but the question of whether it's too expensive (in moral and ethical terms) is far from answered. In my opinion, it has not reached that point yet.

[tags]Erbitux, journalism, bad journalism, pharmacy, R&D, ImClone, WSJ, Wall Street Journal, Avastin, Revlimid, Tarceva, oncology, cancer[/tags]

Chantix joins another smoking-cessation drug that's not very popular at all: Zyban. Zyban never really made it big because insurance companies refused to pay for it, and there was another drug on the market that had the same active ingredient — the perennially popular Wellbutrin.

For Pfizer's sake, I hope they find a second clinical use for Chantix before someone else does, otherwise I suspect they will have wasted a boatload of money. Rarely are brand-name medications priced low enough to appeal to the masses who have to pay out-of-pocket.

On a completely unrelated note, I saw Thank You for Smoking yesterday and it was excellent.

[tags]Chantix, Pfizer, smoking cessation, Wellbutrin, Zyban[/tags]

I do not doubt the accuracy of the study — truth be told, I'm surprised it's not closer to 35% — but it is certainly no cause for alarm, or even a mention in a mainstream newspaper. The piece is pure fear-mongering, and the 6 medications that are specifically cited are largely broad-spectrum drugs. These are only available in the print edition of USA Today, but here they are:

• Neurontin (gabapentin) — epilepsy, PHN
• Risperdal (risperidone) — schizophrenia, mania and BPD
• Restoril (temazepam) — short-term insomnia
• Ciloxan(!) (ophthalmic ciprofloxacin) — eye infections
• Elavil (amitriptyline) — depression
• Pamelor/Aventyl (nortriptyline) — depression

While I won't go through each of the drugs listed about specifically, I will talk about them (and their cousins) in very general terms. I will give Ms. Ruben one thing, though. She did mention that many of the name-brand drugs no longer have patent protection, and so it wouldn't be profitable for their respective manufacturer's to seek approval for a broader range of conditions.

1. Neurontin is a drug that is barely understood. It is approved by the FDA for two uses, postherpetic neuralgia and epilepsy, but it's used for many, many other things. Among these uses are chronic migraines and "zinging" nerve pain not associated with shingles. New uses are found for gabapentin on a regular basis. It is unlikely that any of these off-label uses will ever be officially approved simply because Pfizer has financial motivation to pay for the process.

2. The *triptylines (and I'll throw Desyrel/trazodone in there as well, even though it wasn't listed) are old drugs, and they were originally used as tri-cyclic antidepressants, but they had a other effects on the body as well. Trazodone and amitriptyline can be used for sleeping, and the latter can be used for bed-wetting. Nortriptyline is often used as a pain medication in select cases, and can also be used to treat migraines. These uses are widely accepted and understood, but like Neurontin, their mechanism of action and why they work is not fully understood. Also like Neurontin, their patents have expired, and it wouldn't be a wise financial move for their manufacturers to pursue getting them approved for other uses.

3. Ciloxan is nothing but Cipro in eyedrop form. Cipro, of course, is a well-known antibiotic used to treat many different kinds of infections. It stands to reason that the eyedrop form might be used to treat similar infections in the eye and (sometimes) the ear. (Though there are otic forms of Cipro already.)

4. Restoril is in the benzodiazepine family. The grandaddy of all of the benzos, of course, is Valium. There are others: Ativan, Xanax, to name a few. All of them are nonselective. They all work on the same GABA_A receptors. What is different is the half-life. Temazepam happens to have a half-life that is conducive to a good night's sleep, and that is the only reason it's used as a sleep med.*

5. Atypical antipsychotics fall in the same gray area that the tri-cyclic antidepressants do. They aren't well understood, and new uses for them are being found all the time. Yesterday I mentioned Seroquel, and I said that it was sometimes used to help those taking stimulants to combat ADHD. Well it is, and Risperdal and other similar medications are used in novel ways as well.

It's sometimes shocking to those outside the medical field just how little is known about drugs and how they work. What is known, however is that they do work. Perfect understanding is never a requirement for usage, and to expect otherwise is hypocritical and foolish.

* There are other small differences that set the benzos apart from one another as well, such as dosage and how rapidly they are absorbed.

[tags]Prescriptions, pharmacy, off-label drug usage, journalism, bad journalism[/tags]

Unfortunately, I can't seem to find which drugs' patents will expire without a generic equivalent to take its place — I suspect that none of them are massively profitable by themselves — but all told, the market value of these 800 drugs is a whopping $78 billion per year for their manufacturers. For comparison, the entire generic drug industry is only worth just over $22 billion — even though it accounts for over half the prescriptions dispensed each year in the United States. Broken down, that's almost $100 million per drug, ceteris paribus. Regardless of the specifics of each case, the aggregate dollars involved are huge.

If a creative generic manufacturer like Teva can squeak a few generic approvals by, they will effectively have a six-month monopoly on those drugs. The Hatch-Waxman Act allows the first generic manufacturer to produce and sell their generic equivalent with no competition — save from its brand equivalent. These first six months are crucial. During this time, a generic drug usually undercuts the brand-name competition by about 6%. This is a hugely profitable time, because once other generic manufacturers are allowed to start selling their own equivalents, the price drops to some 80% less than the brand-name drug, so in theory, that first-to-market manufacturer can make more in those first six months than they could in the 4-5 years after their monopoly ends.

Big Pharma sometimes combats this by paying off the first generic manufacturer to continue their monopoly for another 180 days — which in the case of a huge drug like Zoloft or Zocor could be in the billions of dollars of additional revenue. And sometimes they roll out a lower priced "generic" version themselves, which is really just the name-brand med without the name. (One of these days I'll give you an example of how convoluted — and silly — the whole brand-generic wars can be. It's actually kind of funny, but with billions of dollars in revenue at stake, it's a game well-worth playing.)

[tags]patent protection, FDA, generic drugs, pharmacy[/tags]